Commentary Magazine


Topic: inequality

Elizabeth Warren and the Right

While many on the left seem to be pining for a populist 2016 campaign from the likes of Elizabeth Warren, the truth is that a Warren campaign probably has at least as many backers among conservatives. That’s not only because it would mean Hillary Clinton wouldn’t skate to her party’s nomination virtually unopposed (or opposed by Martin O’Malley, which is the same thing). It’s also because Warren was the last hope for the emergence of a serious intellectual liberalism. Yesterday’s Hobby Lobby ruling, however, made it clear such a liberalism is nowhere to be found.

Read More

While many on the left seem to be pining for a populist 2016 campaign from the likes of Elizabeth Warren, the truth is that a Warren campaign probably has at least as many backers among conservatives. That’s not only because it would mean Hillary Clinton wouldn’t skate to her party’s nomination virtually unopposed (or opposed by Martin O’Malley, which is the same thing). It’s also because Warren was the last hope for the emergence of a serious intellectual liberalism. Yesterday’s Hobby Lobby ruling, however, made it clear such a liberalism is nowhere to be found.

On its list of liberal reactions on Twitter to the announcement of the Supreme Court’s decision, Mediaite includes this gem from Warren:

Can’t believe we live in a world where we’d even consider letting big corps deny women access to basic care based on vague moral objections.

Now, those who followed the case know that none of that is true. But just as disconcerting as the complete disregard for the facts is Warren’s dismissive attitude toward Christian belief. Warren sees opposition to abortifacients as “vague moral objections.” There was a time liberals argued that Warren was needed in the Senate to speak up for the people, to advocate for the Americans who weren’t getting a fair shake from their government. It turns out putting Elizabeth Warren in the Senate meant Americans would need protection for their basic freedoms against the government more than ever.

Warren’s delegitimization of religious belief and practice to empower government at the expense of the individual is coupled with her denial of the basic science behind Hobby Lobby’s objections to being forced to provide abortifacients. But it shouldn’t come as a surprise. Last month, National Review’s Patrick Brennan observed an event at which Warren joined French economist Thomas Piketty to talk about inequality.

Brennan notes that the two discussed some of Warren’s plans for college loan and tax reform, and that Warren’s plans are, from a policy standpoint, distinctly unimpressive. They are liberal crowd-pleasers, not informed and judicious attempts to solve problems. Brennan writes:

Warren’s agenda, left-leaning as it is, isn’t about rigorous progressive examination of what’s gone wrong with our system or how to fix it. It’s about intuitively appealing ideas and pleasing particular constituencies. Of course, this is pretty good politics — as the number of attendees who told me they want Warren to run for president seems to suggest.

But her fan base may end up disappointed.  For one, she was a reluctant Senate candidate, and a Warren for President campaign still seems a far-off dream. And Professor Piketty — perhaps sensing that she’s as good as the left wing of American politics has these days — wasn’t about to say it, but Elizabeth Warren isn’t an economic expert or a progressive policy crusader. She’s a talented populist who sells clever but unserious proposals with a sense of academic sophistication that makes Bostonians feel like they’re clapping for someone whose views are an intellectual cut above Ed Schultz’s. In the end, they’re not.

Conservatives had higher hopes for Warren too, because they believed for a time that she was proof it was still possible for a progressive politician to engage seriously in a policy debate. That ship has sailed.

Of course, it’s all relative. However unserious Warren’s response to Hobby Lobby, it had nothing on Hillary Clinton’s. The former secretary of state was at the Aspen Ideas Festival, where she was asked about the Supreme Court decision. According to the Atlantic, which sponsors the festival, Clinton actually said the following:

“I disagree with the reasoning as well as the conclusion,” Clinton said, almost before Isaacson had his question out. “I find it deeply disturbing.” …

“Part of the reason I was so adamant about including women and girls [in State Department efforts] is that they’re often the canaries in the mine,” Clinton explained. “It is a disturbing trend that you see in a lot of societies that are unstable, anti-democratic, and prone to extremism. Women’s bodies are used as the defining and unifying issue to bring together people—men—to get them to behave in ways that are disadvantageous to women but prop up rulers.”

Now, she said, something similar was happening in the United States, where religion was worming its way into government. “Many more companies will claim religious beliefs. Some will be some sincere, others maybe not. We’re going to see this one insurable service cut out for many women,” she said. “This is a really bad, slippery slope.”

This person is, by all accounts, running for president of the United States. Which makes it easier to understand conservatives pining for a Warren candidacy, I suppose. But conservatives looking for a Democratic candidate willing to have a serious debate on the issues will be waiting quite a while, it appears.

Read Less

Thomas Piketty and the Financial Times

The French economist Thomas Piketty has made quite a splash with his new book Capital in the 21st Century, which is now No. 5 on Amazon’s bestseller list. That’s an amazing achievement for a book that positively bristles with charts, graphs, and abstruse economic arguments. I suspect it will be more purchased than actually read.

But the Financial Times has accused Piketty of doing a poor job with his data. I am not in a position to have an opinion on this as it involves complicated statistical analysis that is above my pay grade. But Scott Winship, a senior fellow at the Manhattan Institute, is in such a position and he’s not very impressed with the Financial Times’s analysis:

Read More

The French economist Thomas Piketty has made quite a splash with his new book Capital in the 21st Century, which is now No. 5 on Amazon’s bestseller list. That’s an amazing achievement for a book that positively bristles with charts, graphs, and abstruse economic arguments. I suspect it will be more purchased than actually read.

But the Financial Times has accused Piketty of doing a poor job with his data. I am not in a position to have an opinion on this as it involves complicated statistical analysis that is above my pay grade. But Scott Winship, a senior fellow at the Manhattan Institute, is in such a position and he’s not very impressed with the Financial Times’s analysis:

The Financial Times blew the data issues it identified out of proportion. Giles discovered a couple of clear errors and a number of adjustments that look questionable but have barely any impact on Piketty’s charts. Much of his critique could have been consigned to a footnote to the effect that he uncovered other mistakes and questionable choices that do not actually change Piketty’s results. Giles’s post is written in a way that makes you think the alleged problems with Piketty’s data are more legion than they are. And he’s made some errors himself along the way.

However, the distinguished economist Martin Feldstein, a professor at Harvard and the chairman of the Council of Economic Advisors under Ronald Reagan has other bones to pick with Piketty’s book, principally that Piketty failed to take into account how changes in American tax law affected people’s behavior and thus deeply affected the statistics:

These changes in taxpayer behavior substantially increased the amount of income included on the returns of high-income individuals. This creates the false impression of a sharp rise in the incomes of high-income taxpayers even though there was only a change in the legal form of that income. This transformation occurred gradually over many years as taxpayers changed their behavior and their accounting practices to reflect the new rules. The business income of Subchapter S corporations alone rose from $500 billion in 1986 to $1.8 trillion by 1992. …

Finally, Mr. Piketty’s use of estate-tax data to explore what he sees as the increasing inequality of wealth is problematic. In part, this is because of changes in estate and gift-tax rules, but more fundamentally because bequeathable assets are only a small part of the wealth that most individuals have for their retirement years. That wealth includes the present actuarial value of Social Security and retiree health benefits, and the income that will flow from employer-provided pensions. If this wealth were taken into account, the measured concentration of wealth would be much less than Mr. Piketty’s numbers imply.

And I certainly agree with Prof. Feldstein’s conclusion:

The problem with the distribution of income in this country is not that some people earn high incomes because of skill, training or luck. The problem is the persistence of poverty. To reduce that persistent poverty we need stronger economic growth and a different approach to education and training, not the confiscatory taxes on income and wealth that Mr. Piketty recommends.

Read Less

Inequality’s Inconvenient Truths

Pop quiz: which Tea Party fiscal conservative said the following: “If you want to live in a more equal community, it might mean living in a more moribund economy.” Since this is obviously a trick question, here’s the answer: Annie Lowrey, the economics writer for the New York Times. Lowrey was offering a bit of common sense and basic economics. As such, the Times is a strange place for it: this sort of talk is usually the province of conservatives trying to explain how market economies work.

Lowrey’s piece was occasioned by the release of a study on inequality in American cities by the left-leaning Brookings Institution. To be sure, the study’s author, Alan Berube, does not think a city with high inequality is in the clear: “It may struggle to maintain mixed-income school environments that produce better outcomes for low-income kids. It may have too narrow a tax base from which to sustainably raise the revenues necessary for essential city services. And it may fail to produce housing and neighborhoods accessible to middle-class workers and families, so that those who move up or down the income ladder ultimately have no choice but to move out.”

But the causes of that inequality, the conditions that foster it, and the surest means to reduce it all throw cold water on President Obama’s inequality rhetoric and the class-warfare battle lines the Democrats have drawn. Contrary to the rich-getting-richer rhetoric the president relies on, Berube found that between 2007 and 2012, of the cities that saw dramatic increases in inequality, “most were not places where the rich made astronomical gains, but where low-income households suffered most from the recession and weak recovery…. Inequality increased across cities despite the fact that rich households were less rich in 2012 than in 2007.”

Read More

Pop quiz: which Tea Party fiscal conservative said the following: “If you want to live in a more equal community, it might mean living in a more moribund economy.” Since this is obviously a trick question, here’s the answer: Annie Lowrey, the economics writer for the New York Times. Lowrey was offering a bit of common sense and basic economics. As such, the Times is a strange place for it: this sort of talk is usually the province of conservatives trying to explain how market economies work.

Lowrey’s piece was occasioned by the release of a study on inequality in American cities by the left-leaning Brookings Institution. To be sure, the study’s author, Alan Berube, does not think a city with high inequality is in the clear: “It may struggle to maintain mixed-income school environments that produce better outcomes for low-income kids. It may have too narrow a tax base from which to sustainably raise the revenues necessary for essential city services. And it may fail to produce housing and neighborhoods accessible to middle-class workers and families, so that those who move up or down the income ladder ultimately have no choice but to move out.”

But the causes of that inequality, the conditions that foster it, and the surest means to reduce it all throw cold water on President Obama’s inequality rhetoric and the class-warfare battle lines the Democrats have drawn. Contrary to the rich-getting-richer rhetoric the president relies on, Berube found that between 2007 and 2012, of the cities that saw dramatic increases in inequality, “most were not places where the rich made astronomical gains, but where low-income households suffered most from the recession and weak recovery…. Inequality increased across cities despite the fact that rich households were less rich in 2012 than in 2007.”

What they need most, then, is job creation. The Brookings study finds that cities with high inequality are better at producing wealth–and for good reason. The job market in such cities tends more toward growth industries. Lowrey’s follow-up on the report includes comments from Berube on the desirability of some of the causes of inequality, even if some of its effects are undesirable:

But in some cases, higher income inequality might go hand in hand with economic vibrancy, the study found. “These more equal cities — they’re not home to the sectors driving economic growth, like technology and finance,” said its author, Alan Berube. “These are places that are home to sectors like transportation, logistics, warehousing.”

He added, “In terms of actual per capita income growth, these are not places that would be high up the list.”

Lowrey is of course not far behind with the caveats and qualifications. “That does not mean that measures intended to mitigate inequality will necessarily reduce the vibrancy of a local community,” she chimes in. But she leaves it at that. It’s not much of a defense of efforts to combat inequality. It basically amounts to: Efforts to reduce inequality will very likely pose a threat to economic growth and employment, but it’s possible, certainly, that not every attempt to mitigate inequality will crush the poor and unemployed under the counterproductive weight of liberals’ good intentions.

Roundabout rhetoric on this issue is necessary for the left because they can’t just come out and say what they mean without losing elections. Namely, that their desire to feel morally superior to others is more important than the actual welfare of their intended beneficiaries.

In fairness, elsewhere in the Times piece we do get a suggestion for reducing urban inequality without confiscating the wealth of others or destroying economic growth: “But New York and many other cities have promised to tackle inequality, in part by shifting the tax burden, but also through initiatives aimed at attracting middle-class families with cheaper housing and better schools.”

How do you cut inequality without destroying the economy? You simply import people who aren’t rich and aren’t poor! But what does this tell us about the concentration on income inequality? That it’s a case of misplaced priorities. Importing not-rich-but-not-poor residents doesn’t make any structural change to the city’s economy so much as it papers over the causes of inequality by gaming the numbers.

Democrats and the president make the case that the key to fighting inequality is making the poor un-poor. Importing middle-class folks from the suburbs doesn’t do that, does it? Sure, it may have peripheral benefits for the less well-off. But it doesn’t rescue others from poverty. It simply makes it look like poverty is less endemic. It’s a cosmetic façade, in other words. Which is what may make it so attractive to liberal policymakers.

Read Less

Obama’s Priorities v. Those of the American People

President Obama has recently said that the trend of growing inequality is “certainly my highest priority.” He might be interested to know that it’s not the highest priority for the people he was voted to represent.

Not even close.

A new Gallup poll found the 10 most important issues facing the American people to be, in order, (1) unemployment/jobs; (2) economy in general; (3) government; (4) health care; (5) federal budget deficit/federal debt; (6) immigration/illegal aliens; (7) ethical/moral decline; (8) education; (9) lack of money; and (10) poverty/hunger/homelessness. Even among Democrats, income inequality doesn’t rate. Neither, by the way, does raising the minimum wage, climate change, and gun control–three other issues Mr. Obama has made central to his second-term agenda.

So why is the president talking about issues that the public has so little concern about?

Read More

President Obama has recently said that the trend of growing inequality is “certainly my highest priority.” He might be interested to know that it’s not the highest priority for the people he was voted to represent.

Not even close.

A new Gallup poll found the 10 most important issues facing the American people to be, in order, (1) unemployment/jobs; (2) economy in general; (3) government; (4) health care; (5) federal budget deficit/federal debt; (6) immigration/illegal aliens; (7) ethical/moral decline; (8) education; (9) lack of money; and (10) poverty/hunger/homelessness. Even among Democrats, income inequality doesn’t rate. Neither, by the way, does raising the minimum wage, climate change, and gun control–three other issues Mr. Obama has made central to his second-term agenda.

So why is the president talking about issues that the public has so little concern about?

Part of the explanation, I suspect, is that Mr. Obama really believes in his (progressive) agenda and feels more liberated in his second term to pursue it. But I also imagine that the president has very little to say that’s helpful to him or his party about unemployment and jobs, the economy in general, health care, and the debt. So Mr. Obama is turning to other issues, hoping to shift the American people’s focus from what they care about to what he cares about.

This effort is turning out to be a bust. The public is tuning the president out and turning him off. His words are like white noise, and he increasingly looks to be a lame duck–one day impotent, the next day irrelevant, drifting along in a world of his own. 

Mr. Obama seems to think that as a second-term president, he can talk about what he darn well pleases. Maybe. We’ll see what the voters think about that in November, when they get their chance to render their judgment on his second term. 

Read Less

Poverty, Social Mobility, and the Party of Lincoln

Yesterday Senator Marco Rubio delivered a major speech on poverty and social mobility. It’s impressive for several reasons.

While not ignoring the issue of income inequality, he made what I think is the correct and important point: Lack of social mobility, not income inequality, is what we should focus on. And the speech was intellectually impressive in part because it was intellectually honest. Senator Rubio explained with some sophistication the reasons for what he calls “opportunity inequality”–including long-term economic, social, cultural, and educational causes. This speech was not politically partisan or shallow; it admitted the causes of poverty and decreasing social mobility are complex. (Many European countries now have as much social mobility as, and more opportunity than, the United States; and today a child’s future depends on parental income more in America than it does in Canada and Europe.) Senator Rubio’s address deepened the public’s understanding of these issues, and that’s all to the good.

On the policy side of things, Senator Rubio’s proposals on the Flex Fund (which would consolidate many anti-poverty programs that in turn would be distributed to the states to enact their own anti-poverty agenda) and transforming the Earned Income Tax Credit into a real wage subsidy are promising steps, with more, I gather, to follow.

What Mr. Rubio unveiled yesterday merits support on federalism and subsidiary grounds, in terms of how we should think about the working poor versus those who are unable to work, because it incentivizes work and creates incentives to avoid unemployment programs, and because it makes upward mobility more, not less, likely. (For a more detailed and illuminating discussion of the merits of Rubio’s proposals, see here and here.)

Read More

Yesterday Senator Marco Rubio delivered a major speech on poverty and social mobility. It’s impressive for several reasons.

While not ignoring the issue of income inequality, he made what I think is the correct and important point: Lack of social mobility, not income inequality, is what we should focus on. And the speech was intellectually impressive in part because it was intellectually honest. Senator Rubio explained with some sophistication the reasons for what he calls “opportunity inequality”–including long-term economic, social, cultural, and educational causes. This speech was not politically partisan or shallow; it admitted the causes of poverty and decreasing social mobility are complex. (Many European countries now have as much social mobility as, and more opportunity than, the United States; and today a child’s future depends on parental income more in America than it does in Canada and Europe.) Senator Rubio’s address deepened the public’s understanding of these issues, and that’s all to the good.

On the policy side of things, Senator Rubio’s proposals on the Flex Fund (which would consolidate many anti-poverty programs that in turn would be distributed to the states to enact their own anti-poverty agenda) and transforming the Earned Income Tax Credit into a real wage subsidy are promising steps, with more, I gather, to follow.

What Mr. Rubio unveiled yesterday merits support on federalism and subsidiary grounds, in terms of how we should think about the working poor versus those who are unable to work, because it incentivizes work and creates incentives to avoid unemployment programs, and because it makes upward mobility more, not less, likely. (For a more detailed and illuminating discussion of the merits of Rubio’s proposals, see here and here.)

As for politics: This kind of effort can only help the Republican Party, which has been too disengaged and morally indifferent to the problems facing the poor for too long. It has not offered a compelling agenda that addresses the economic and structural problems that face (especially) those living in the shadows of society. Whether or not to support or oppose Senator Rubio’s proposals should hinge on the substantive merits. But of course you can’t take the politics out of politics, and so as a purely political matter, focusing on the plight of the poor would certainly make middle-class voters, and especially middle-class women, more amenable to the GOP.

I’ve written before that social mobility is the central moral promise of American economic life; the hallmark of our system is the potential for advancement and greater prosperity rooted in merit and hard work rather than in the circumstances of one’s birth. This was the key insight of Lincoln, who noted that “the progress by which the poor, honest, industrious and resolute man raises himself, that he may work on his own account and hire somebody else … is the great principle for which this government was really formed.”

It’s time that the Party of Lincoln more fully embrace the philosophy of Lincoln. That is, I think, what Marco Rubio (and congressional Republicans, like Representatives Eric Cantor and Paul Ryan and Senator Mike Lee) are doing. More Republicans should follow their lead. 

Read Less

Bill de Blasio’s Mandate

While it’s tempting for politicians to interpret an election victory as a mandate that aligns with their personal priorities over those of the electorate, the disconnect is especially glaring in the case of Bill de Blasio. The new mayor of New York City was sworn in yesterday in a downright bizarre spectacle. During a procession of speeches, the New York City of 2013-14 was notably absent to make room for the New York City of the progressives’ fevered imaginations, completely at odds with how New Yorkers generally view their home.

A majority of black and Hispanic New Yorkers believe race relations in their city are “generally good.” Yet the chaplain who gave yesterday’s invocation claimed the city was a “plantation.” New York has seen a steady drop in the murder rate–to historic lows, in fact–for over a decade at the same time as its incarceration rate has plummeted. Yet de Blasio’s inauguration featured a speech by Harry Belafonte in which the crowd was treated to his false depiction of the city: “While it is encouraging to know that the statistics have indicated a recent drop in our city’s murder rate, New York alarmingly plays a tragic role in the fact that our nation has the largest prison population in the world.”

But demonstrably false progressive propaganda on race and crime are just the opening acts. The main event, of course, is income inequality. This is a Progressive Moment, we are told, thanks to the victory of de Blasio and others, such as the election of an avowed socialist to Seattle’s city council advocating policies she acknowledged will cost jobs–but hey, revolutions are messy. And this Progressive Moment was made possible, as the New York Times explains, by frustration with “the city’s current gilded era” which “propelled” de Blasio to power. Except, of course, that this is a fantasy.

Read More

While it’s tempting for politicians to interpret an election victory as a mandate that aligns with their personal priorities over those of the electorate, the disconnect is especially glaring in the case of Bill de Blasio. The new mayor of New York City was sworn in yesterday in a downright bizarre spectacle. During a procession of speeches, the New York City of 2013-14 was notably absent to make room for the New York City of the progressives’ fevered imaginations, completely at odds with how New Yorkers generally view their home.

A majority of black and Hispanic New Yorkers believe race relations in their city are “generally good.” Yet the chaplain who gave yesterday’s invocation claimed the city was a “plantation.” New York has seen a steady drop in the murder rate–to historic lows, in fact–for over a decade at the same time as its incarceration rate has plummeted. Yet de Blasio’s inauguration featured a speech by Harry Belafonte in which the crowd was treated to his false depiction of the city: “While it is encouraging to know that the statistics have indicated a recent drop in our city’s murder rate, New York alarmingly plays a tragic role in the fact that our nation has the largest prison population in the world.”

But demonstrably false progressive propaganda on race and crime are just the opening acts. The main event, of course, is income inequality. This is a Progressive Moment, we are told, thanks to the victory of de Blasio and others, such as the election of an avowed socialist to Seattle’s city council advocating policies she acknowledged will cost jobs–but hey, revolutions are messy. And this Progressive Moment was made possible, as the New York Times explains, by frustration with “the city’s current gilded era” which “propelled” de Blasio to power. Except, of course, that this is a fantasy.

Back to the polling on New Yorkers’ attitudes toward their city: a majority say the economic condition of the city is good, and closing the income gap between rich and poor rated the lowest of four voter priorities even at the height of the de Blasio campaign. How do these numbers square with de Blasio’s landslide victory? Perfectly, as a matter of fact.

De Blasio was practically handed the mayoralty after winning the Democratic nomination and never looking back. But the primaries garnered 20 percent turnout. As the New York Times explained, this means de Blasio’s initial victory was bestowed on him by “about 3 percent of all New Yorkers.” The Times also reported that turnout in the general election was a record low of 24 percent–noticeably lower, even, than the turnout for Michael Bloomberg’s election to a third term.

This also casts some light on the question of what kind of national momentum this Progressive Moment has. New York is a liberal city. Seattle is a liberal city. It’s certainly notable that de Blasio is the first registered Democrat elected to lead New York in two decades, but it’s not as though statist excesses were rare in the Bloomberg administration–and, let us not forget, Bloomberg was a former registered Democrat who changed his registration in order to avoid a Democratic primary and then dropped his Republican registration while in office.

Some, such as reporters at Politico, suggest the local progressives may elevate the conversation to the national level. The outlet has a story about the crucial relationships de Blasio will have to manage, and President Obama is at the top of the list:

De Blasio’s going to want attention from the federal government that Obama probably won’t be able to give, and Obama’s going to be pressured to respond more fully to the kind of progressive politics that de Blasio represents.

Will he, though? Will the leftwing mayor of New York put pressure on a second-term president to follow his lead? Anything more than lip service is highly doubtful, and class warfare rhetoric was part of the president’s speeches before most people outside New York knew much about de Blasio. You could argue, in fact, the opposite: Americans on the whole seem more concerned about inequality than New Yorkers. But then you’d have to contend with the fact that for five years Obama has been pushing inequality as a stain on the national conscience and his approval ratings have been in a nosedive.

In that way and in others, the president offers de Blasio a cautionary tale. Obama was elected in the midst of an economic crisis, and he chose to push for an unpopular health-care reform bill despite the fact that health care was not a top priority for voters in 2008 and at the time Americans favored keeping the current health-care system. The lesson for de Blasio is how easily an administration can be knocked off-course if public opinion is discarded as soon as the sun sets on Election Day.

Read Less

Happy Birthday to the Income Tax

Income inequality has long been a bugaboo of the left. There is just something wrong, liberals think, with X earning much more than Y. They never explain why it’s wrong, of course, apparently regarding it as self-evident. What it is, actually, is a modern echo of the medieval notion of the “just price,” the idea that everything has a proper price for which it should be bought or sold and the authorities (the Church in the Middle Ages, the federal government today) should see that everything is.

In the early Clinton era, Democrats passed and the president signed a bill limiting the deductibility of executive salaries over $1 million from corporate income taxes. Naturally, they didn’t limit the deductibility of the enormous incomes of their Hollywood pals, but intellectual consistency is seldom a political virtue.

The level of inequality diminished, briefly, during the financial crisis of 2008, as stock prices crashed and dividends were cut. But it is now increasing again, as CBS news reported recently. Some economists recommend a top income tax rate of 73 percent in order to foster more equality. But this fails to take into account the ample evidence that as income-tax rates rise, so does tax avoidance.

Read More

Income inequality has long been a bugaboo of the left. There is just something wrong, liberals think, with X earning much more than Y. They never explain why it’s wrong, of course, apparently regarding it as self-evident. What it is, actually, is a modern echo of the medieval notion of the “just price,” the idea that everything has a proper price for which it should be bought or sold and the authorities (the Church in the Middle Ages, the federal government today) should see that everything is.

In the early Clinton era, Democrats passed and the president signed a bill limiting the deductibility of executive salaries over $1 million from corporate income taxes. Naturally, they didn’t limit the deductibility of the enormous incomes of their Hollywood pals, but intellectual consistency is seldom a political virtue.

The level of inequality diminished, briefly, during the financial crisis of 2008, as stock prices crashed and dividends were cut. But it is now increasing again, as CBS news reported recently. Some economists recommend a top income tax rate of 73 percent in order to foster more equality. But this fails to take into account the ample evidence that as income-tax rates rise, so does tax avoidance.

Others argue that income inequality and growth are inextricably linked and trying to limit one will, necessarily, limit the other.

Still others argue, what income inequality? They say it is mostly a statistical illusion that results from how the “poverty rate” is determined and how income is measured. For instance, the CBO counts realized capital gains as income but not unrealized capital gains. So if two people buy houses the same year for the same price and one sells his 30 years later for a gain of $500,000, he’s in the one percent, but his neighbor who didn’t sell is not. Next year, of course, the seller will be back among the hoi polloi.

And transfer payments, such as Social Security, Medicare, and food stamps, are not counted as income by the CBO in determining the poverty rate. So an elderly couple might be considered below the poverty line, despite receiving a check for $1,700 every month from the government and having most of their medical bills picked up. The elderly couple regard the $1,700 as income (it buys stuff, after all), so why shouldn’t the CBO count it as income?

As so often, statistics are being wielded as political weapons, not as a means to understanding the human universe. And meanwhile, the real measure of prosperity—consumption—is often ignored. For instance, while “wages,” as defined by the Bureau of Labor Statistics, have been relatively flat since the 1980s, consumption by the less affluent has increased briskly. In 2001, only 19.8 percent of low-income households owned a computer. By 2009, it was 47.7 percent. In 2001 21.9 percent of these families had living space of more than six rooms (not counting bathrooms), by 2009 that had risen to 30 percent.

Meanwhile, the No. 1 tool that politicians use to play politics with income inequality, the income tax, turned 100 last Friday. How much has it been used for political purposes? As John Fund points out, in 1913, the tax code was 400 pages long. Today it is 73,954 pages long.

Read Less

Wanted: A Republican Governing Agenda

The New York Times reports on a study issued yesterday by two former Census Bureau officials. The study shows that although median annual household income rose to $52,100 in June, from its recent low of $50,700 in August 2011, it remained $2,400 lower—a 4.4 percent decline—than in June 2009, when the recession ended.

According to the Times:

Since the end of the recession … household income has declined for all but a few population groups. Some of the largest percentage declines occurred for groups whose income was already well below the median, like African-Americans, Southerners, people who did not attend college, and households headed by people under age 25.

“Groups with low incomes tended to have steeper declines in income,” said Gordon W. Green Jr., who wrote the report with John F. Coder, a colleague at Sentier Research, which specializes in analyzing household economic data.

Households headed by people ages 65 to 74 were the only group in the study that experienced a statistically significant increase in post-recession income, helped perhaps by the decision of some older workers to remain in the work force or re-enter it.

There are several things to make of these findings, the first of which is that we’ve seen a decline in median income in the aftermath of a recession. During a recovery. That’s a fairly remarkable (and discouraging) development.

Read More

The New York Times reports on a study issued yesterday by two former Census Bureau officials. The study shows that although median annual household income rose to $52,100 in June, from its recent low of $50,700 in August 2011, it remained $2,400 lower—a 4.4 percent decline—than in June 2009, when the recession ended.

According to the Times:

Since the end of the recession … household income has declined for all but a few population groups. Some of the largest percentage declines occurred for groups whose income was already well below the median, like African-Americans, Southerners, people who did not attend college, and households headed by people under age 25.

“Groups with low incomes tended to have steeper declines in income,” said Gordon W. Green Jr., who wrote the report with John F. Coder, a colleague at Sentier Research, which specializes in analyzing household economic data.

Households headed by people ages 65 to 74 were the only group in the study that experienced a statistically significant increase in post-recession income, helped perhaps by the decision of some older workers to remain in the work force or re-enter it.

There are several things to make of these findings, the first of which is that we’ve seen a decline in median income in the aftermath of a recession. During a recovery. That’s a fairly remarkable (and discouraging) development.

As for President Obama’s response to all this, a recent editorial by the Wall Street Journal gets it quite right: “For four and a half years, Mr. Obama has focused his policies on reducing inequality rather than increasing growth. The predictable result has been more inequality and less growth… The core problem has been Mr. Obama’s focus on spreading the wealth rather than creating it.”

Mr. Obama, then, is not only not up to confronting the problems of this era; he is exacerbating them. But even those of us who are critics of the president should admit that the problems afflicting the American economy–including (but not exclusive to) wage stagnation among the middle class, less social mobility among the lower class, and increased inequality–predate the Obama presidency. They are complex and defy simplistic partisan explanations.

Depending on which trend we’re talking about, they are rooted in deep cultural shifts (including a weakening marriage culture), globalization and advances in technology (which have moved us toward an economy that favors skilled over unskilled labor), a decline in workforce participation rates, rising health care costs, educational mediocrity (and downright awful education for the underclass), the structure of our entitlement programs (our transfer payments are increasingly regressive and benefit households headed by older adults, who tend to be wealthier than young adults), a byzantine tax code, and slow growth (the post-2008 recession growth rate has been roughly 2 percent).

In the face of America’s deep cultural and structural problems, assembling an agenda–including a comprehensive social-capital agenda that equips Americans, especially poor Americans, with the skills, values and habits that will allow them to succeed in a modern, free society–is a hugely complicated task. It will require a thoroughgoing reform agenda focused on entitlements, education, immigration, our financial system, and our tax code. A lot of good work is being done by policy experts and public intellectuals, by governors, and some members of Congress. (At a later date I’ll lay out what I think would constitute the broad outlines of an agenda, but for starters it might be worth reading thisthis, and this.)

For the most part, however, Republicans and conservatives sound out of touch, their solutions stale, as if they fail to take into account new circumstances. And it is no wonder that Republican policies seem stale; they are very nearly identical to those offered up by the party more than 30 years ago. I’ve argued before that “For Republicans to design an agenda that applies to the conditions of 1980 is as if Ronald Reagan designed his agenda for conditions that existed in the Truman years.” It doesn’t help, of course, that prominent Republicans occupy their time pursuing tactics that are unworkable and qualify as primal screams (e.g., threatening to shut down the government unless the Affordable Care Act is defunded).

The public is in the process of concluding that President Obama and the Democratic Party, the embodiments of reactionary liberalism, are intellectually bankrupt. They are overmatched by events. This affords an opening for Republicans to put forward a positive governing vision. The elements of a conservative reform agenda certainly exist. But for the GOP to win over new hearts and minds will require the party to embrace that agenda more fully than it has; to overcome some old (bad) habits, to put a new frame on events, and to convince the public that they are the party of modernization, reform, and renewal.

It still has some distance to go. 

Read Less

The Right Way to Reduce Inequality

The most recent Gallup poll, which shows a majority of Americans believe that some of their neighbors have too much money and that the government should therefore confiscate and redistribute some of it, is likely to please the president, who based his reelection campaign on class resentment. Though Gallup paints this as vindication for the president on the message, it does expose the problem with how we tend to conduct the conversation of basing policy on that message. Gallup pronounces:

Inequality is and will continue to be one of the most important domestic political issues. President Barack Obama has consistently pushed for measures that he believes would provide those at the bottom end of the socioeconomic spectrum a fairer chance to succeed, and has coupled that with consistent arguments for higher taxes on those with high incomes and wealth. At this point, the American public would generally agree with Obama that wealth should ideally be more evenly distributed — and a modest majority, consisting mainly of Democrats and independents, appears to support the idea of bringing about that redistribution through heavier taxes on the rich.

Read More

The most recent Gallup poll, which shows a majority of Americans believe that some of their neighbors have too much money and that the government should therefore confiscate and redistribute some of it, is likely to please the president, who based his reelection campaign on class resentment. Though Gallup paints this as vindication for the president on the message, it does expose the problem with how we tend to conduct the conversation of basing policy on that message. Gallup pronounces:

Inequality is and will continue to be one of the most important domestic political issues. President Barack Obama has consistently pushed for measures that he believes would provide those at the bottom end of the socioeconomic spectrum a fairer chance to succeed, and has coupled that with consistent arguments for higher taxes on those with high incomes and wealth. At this point, the American public would generally agree with Obama that wealth should ideally be more evenly distributed — and a modest majority, consisting mainly of Democrats and independents, appears to support the idea of bringing about that redistribution through heavier taxes on the rich.

There are generally two weaknesses with how liberals talk about inequality. The first is that they usually begin by assuming inequality is detrimental to society without establishing that it is. They may be right, but it would be unwise to build redistributive policies on class warfare and demonization instead of data. An exception in this regard is the Washington Post’s Brad Plumer, who wrote an interesting piece a few weeks back about new research into “trickle-down consumption.” One example, according to Plumer: “In cities like New York, the wealthiest are competing for the most valuable apartments and bidding up prices — which has broader ripple effects.” The concept is not new, but Plumer’s post adds some interesting context.

Trickle-down consumption, of course, is really a problem in unequal spending which is enabled by, but not the same thing as, unequal income. Additionally, there are advantages to having the wealthy consume instead of save: they support businesses owned by the less wealthy, which increases the income of less well-off, and when they purchase property that will often result in an increase in their taxes. The latter is a result those on the left claim to want, and it comes about through consumption and sometimes job creation (construction, etc.) instead of confiscation. Nonetheless, the discussion is worth having and Plumer’s piece brings hard data to the table instead of stories about Warren Buffett’s secretaries.

Yet it also raises the second issue with how inequality is too often discussed: how it should be rectified. Gallup demonstrates this perfectly when it only proposes one way to redistribute income: by taxing “the rich” more. But there are all sorts of ways to try and level the playing field. Gallup is noticeably vague in giving Obama credit for proposing ways to give the poor a fair shake. There’s a good reason for that.

As I noted in December, referencing an important article on taxing the rich by Joel Kotkin, Obama’s soak-the-rich approach to taxation can easily exacerbate existing inequality. Many high-earners live in cities, where there are also a large number of low-income residents. As Kotkin explains, this makes these economies heavily dependent on the consumption of the wealthy, and raising taxes on them would hit the very industries that typically offer income-class mobility to the poor.

There’s also the issue of education. Obama sought to end the D.C. Opportunity Scholarship Program, which was designed to give low-income youth stuck in D.C.’s failing schools a chance at a better education. His party remains broadly hostile to school choice, siding with public union bosses instead.

And no discussion of inequality should omit crime. The successful policing innovations in New York City have benefited low-income neighborhoods above all. Yet politicians and leftist activists are falling all over themselves to find ways to undo the incredible work of the NYPD. As Fred Siegel wrote recently in the New York Observer:

The Kimani Gray case may fade, but the intertwined issues of crime and race will remain high on the electoral agenda. If the politicians fail to thread the needle, the danger ahead is that New York could regress to a Chicago-like situation, where the well-to-do areas are reasonably well-policed while the minority areas are left to fend for themselves regarding crime. The liberal champions of equality will have once again produced greater inequality.

So by all means, let’s talk about rectifying inequality. But Gallup’s refusal to connect any issue other than taxation with inequality mirrors the left’s own, and ensures that so many worthy policy objectives remain ignored.

Read Less




Welcome to Commentary Magazine.
We hope you enjoy your visit.
As a visitor to our site, you are allowed 8 free articles this month.
This is your first of 8 free articles.

If you are already a digital subscriber, log in here »

Print subscriber? For free access to the website and iPad, register here »

To subscribe, click here to see our subscription offers »

Please note this is an advertisement skip this ad
Clearly, you have a passion for ideas.
Subscribe today for unlimited digital access to the publication that shapes the minds of the people who shape our world.
Get for just
YOU HAVE READ OF 8 FREE ARTICLES THIS MONTH.
FOR JUST
YOU HAVE READ OF 8 FREE ARTICLES THIS MONTH.
FOR JUST
Welcome to Commentary Magazine.
We hope you enjoy your visit.
As a visitor, you are allowed 8 free articles.
This is your first article.
You have read of 8 free articles this month.
YOU HAVE READ 8 OF 8
FREE ARTICLES THIS MONTH.
for full access to
CommentaryMagazine.com
INCLUDES FULL ACCESS TO:
Digital subscriber?
Print subscriber? Get free access »
Call to subscribe: 1-800-829-6270
You can also subscribe
on your computer at
CommentaryMagazine.com.
LOG IN WITH YOUR
COMMENTARY MAGAZINE ID
Don't have a CommentaryMagazine.com log in?
CREATE A COMMENTARY
LOG IN ID
Enter you email address and password below. A confirmation email will be sent to the email address that you provide.